Senate Passes Housing Bill

The Senate has passed a housing bill to jumpstart a $300 billion Federal Housing Administration program refinancing program and shield mortgage servicers from investor lawsuits. By a 91-5 vote, the Senate passed the bill (S. 896) to make the $300 billion FHA Hope for Homeowners program more attractive to investors and servicers so it can finally provide relief for homeowners with underwater mortgages. Servicers are expected to reduce the principal amount of the existing mortgage to qualify borrowers for the H4H program that Congress enacted last summer. So far, it has helped less than 60 borrowers refinance into FHA-insured mortgages. During the last two weeks of March, FHA approved only one H4H loan. The bill also gives HUD more authority to modify delinquent FHA-insured loans and to discipline or debar FHA lenders and loan correspondents. Meanwhile, servicers trying to modify mortgages in private-label securities will enjoy congressional protection from investor lawsuits, if they "believe in good faith" the recovery from a modification will exceed that of a foreclosure. Like a similar bill passed by the House, S. 896 increases the Federal Deposit Insurance Corporation's borrowing authority to deal with rising bank failures.